Jose Luis Campos vs. Francisco J. Campos Trading, Inc.

[SEC-SICD * CASE NO. 2782. August 31, 1990.] JOSE LUIS CAMPOS , petitioner , vs . FRANCISCO J. CAMPOS TRADING, INC. , respondent . D E C I S I O N This is an action for dissolution of Francisco J. Campos Trading, Inc., instituted by petitioner Jose Luis Campos. llcd In support thereof, petitioner alleged inter alia, that he is a director/stockholder of respondent Francisco S. Campos Trading, Inc. with 4,273.75 fully paid shares with a par value of P100.00 per share; that since 1983 up to the present, the petitioner has been prohibited from entering the grocery store and office of the respondent corporation by his brothers and sisters who are also directors and stockholders of said corporation, namely: Enrique Pio Campos, Sr., Alejandro Simon Campos and Luisa Campos Montinola; that as a result of the foregoing acts of the aforesaid directors and stockholders who manage and control the respondent corporation, the petitioner has been deprived of his rights to participate in the management of the corporation, to inspect its books and records, to attend the board and stockholders' meeting and to vote and approve certain corporate acts. Petitioner further averred that since July 1983, the respondent corporation failed and refused and still continues to fail and refuse notwithstanding repeated demands; a) To give petitioner his monthly allowance of P1,000.00; b) To notify the petitioner of the board and stockholders meetings; c) To furnish the petitioner of all the minutes of the board and stockholders' meetings; and d) To furnish the petitioner of the financial statements and balance sheets of the corporation. Moreover, petitioner claims that the respondent corporation has not declared or distributed dividends to the stockholders since then up to the present; that the acts of the officers and stockholders in managing the business of the corporation are illegal considering that the same have not been approved by all the directors or stockholders called for the purpose; that the business of the respondent corporation is presently mismanaged resulting to depletion of its stocks and losses to the corporation and as a result thereon at least ten (10) out of sixteen (16) employees had been dismissed. These employees filed a labor case against the corporation; apparently, this is an attempt on the part of the officers and stockholders managing the corporation to deplete the corporate assets by negotiating the same as collaterals in a loan which was not approved by all the directors or stockholders in a meeting duly called for this purpose. Respondent filed its amended answer thereto and alleged as special and affirmative defenses that the petition is devoid of merit and the petitioner has absolutely no cause of action against the respondent; that petitioner is a member of the family which owns the respondent and no earnest efforts for a compromise were exerted by him before the filing of the instant petition. As a counterclaim, respondent contend that during the term of the petitioner as General Manager of the respondent corporation he converted to his personal benefit corporate funds of the respondent as exemplified by his acquisition of two (2) residential houses and the diversion of a loan of Two Million Nine Hundred Ninety Nine (P2,000,999.00) Pesos for the business of the respondent to his account, which were way out of proportion to his income as General Manager which was only his source; that to cover up this misappropriation, petitioner made it appear in the income tax of the respondent corporation that it incurred losses in the business when you audit, it was not so; that petitioner should account for the assets and income of the respondent during his term as General Manager and return all misappropriated assets or their value to the respondent. There are several ways by which a corporation may be dissolved, whether voluntary or involuntary. These are: (1) by expiration of its term; (2) by voluntary surrender of charter either extra-judicially or on petition filed with the Securities and Exchange Commission, (3) by failure to organize and commence business within two years from incorporation; (4) by revocation of its registration or certificate of incorporation. Apparently, petitioner filed the instant petition to dissolve the respondent corporation because he was deprived of his right as stockholder and director thereof, mismanagement and losses. Several hearings were conducted wherein the petitioner testified for himself. On the other hand, Mrs. Luisa Montinola, the sister of the petitioner testified for the respondent corporation. The most important issue to be determined in this case is whether there is a ground to dissolve the respondent corporation. At the outset, petitioner testified that he filed the petition for dissolution because he wanted once and for all to settle the differences between himself and his brother and secondly, he was not getting any benefits or funds of his investments. It is clear that the vain attempt of the petitioner to recommend the dissolution was for reasons of expediency and economy because of his feud with his brother. Passing now to discuss the issues, petitioner contends that he was deprived of his right as stockholder and director. It must be emphasized that admittedly, petitioner is the majority stockholder of the respondent and for a number of years prior to the filing of the petition from 1980 to 1983, he was the Treasurer and General Manager respectively. It will be recalled that during the meetings held last June 29 and 30, 1983 (Exhs. "1" and "2") the name of the petitioner was recorded as present. Further, the testimony of the respondent's witness established the fact that at all subsequent meetings, petitioner was notified or advised, but, unfortunately he failed to attend because he would be questioned on the alleged anomalies committed during his tenure as General Manager. With respect to mismanagement and losses, petitioner claims that the present management has been mismanaging the respondent corporation because he feels that the finances were being dissipated. There was no convincing proof to conclude this allegation. In fact when the petitioner was the General Manager, he admitted that the respondent corporation was incurring losses. Further, it appears that during the lifetime of the father of the petitioner until his death in 1980, it was only his father who knew whether the corporation had earned profits or not. From the evidence presented, in 1978 and 1979, the respondent corporation reported profits. However, through the years in 1980, 1981 and 1982 before the filing of the petition the said corporation incurred losses and more so in the succeeding years particularly in 1983 wherein our economy went into critical stage. From the facts narrated in the petition and the evidence adduced, we find no justifiable reason to warrant the dissolution of the respondent corporation. Jurisprudence is replete with rulings to the effect, "that the courts proceed with extreme caution in the proceeding which have for their object the forfeiture of corporate franchise, and a forfeiture will not be allowed except under express limitation or plain abuse of power by which the corporation fails to fulfill the design and purpose of its organization." Anent the petitioner's prayer that he be paid the value of his shares in case the dissolution is not granted, we find no substantial basis to sustain the same because the instances enumerated under Section 81 of the Corporation Code allowing a stockholder to exercise his appraisal right are not applicable in the instant case. Further, it can be gainsaid that when a person invests in the stocks of a corporation, he subjects his investment to all the risks of the business and cannot just pull out such investment should the business not come out as he expected. He will have to wait until the corporation is finally dissolved before he can get back his investment. (Campos and Lopez-Campos, Corporation Code, Comments, Notes and Selected Cases) WHEREFORE, judgment is hereby rendered dismissing the instant petition. Respondent's counterclaim is likewise dismissed. LibLex No pronouncement as to costs. SO ORDERED. (SGD.) ENRIQUE L. FLORES, JR. Hearing Officer